Econ305 Chapter3

A person's house is part of her ________. A) liabilities B) wealth C) income D) money

B

All of the following are necessary criteria for a commodity to function as money except ________. A) it must be divisible B) it must deteriorate quickly C) it must be easy to carry D) it must be widely accepted

B

In the money index used by the Bank of Canada: M = X1 + X2 + ... + Xn, the Xs are ________. A) the proportional weights for calculating M B) the n monetary components of M C) the decreasing weights in calculating M D) the increasing weights in calculating M

B

Kevin purchasing concert tickets with his debit card is an example of the ________ function of money. A) unit of account B) medium of exchange C) store of value D) specialization

B

Of the following assets, the least liquid is ________. A) travellers cheques B) a house C) stocks D) chequing deposits

B

A disadvantage of ________ is that it can be very heavy and hard to transport from one place to another. A) commodity money B) fiat money C) paper money D) electronic money

A

Compared to an electronic payments system, a payments system based on cheques has the major drawback that ________. A) cheques take longer to process, meaning that it may take several days before the depositor can get her cash B) legal liability is more clearly defined C) cheques are less costly to process D) fraud may be more difficult to commit when paper receipts are eliminated

A

Recent financial innovation makes the Bank of Canada's job of conducting monetary policy ________. A) easier, since the Bank of Canada now knows what to consider money B) more difficult, since the Bank of Canada no longer knows what to consider money C) easier, since the Bank of Canada no longer knows what to consider money D) more difficult, since the Bank of Canada now knows what to consider money

B

Which of the following sequences accurately describes the evolution of the payments system? A) Barter, coins made of precious metals, cheques, paper currency, electronic funds transfers B) Barter, coins made of precious metals, paper currency, cheques, electronic funds transfers C) Barter, cheques, paper currency, electronic funds transfers D) Barter, cheques, paper currency, coins made of precious metals, electronic funds transfers

B

A problem with barter exchange when there are many goods is that in a barter system ______. A) exchange of services is impossible B) transactions costs are minimized C) there exists a multiple number of prices for each good D) there is only one store of value

C

During hyperinflations, ________. A) middle-class savers benefit as prices rise B) the value of money rises rapidly C) money no longer functions as a good store of value and people may resort to barter transactions on a much larger scale D) money's value remains fixed to the price level; that is, if prices double so does the value of money

C

If there are five goods in a barter economy, one needs to know ten prices in order to exchange one good for another. If, however, there are ten goods in a barter economy, then one needs to know ________ prices in order to exchange one good for another. A) 25 B) 30 C) 45 D) 20

C

When compared to exchange systems that rely on money, disadvantages of the barter system include ________. A) encouraging specialization and the division of labor B) lowering the cost of exchange to those who would specialize C) the requirement of a double coincidence of wants D) lowering the cost of exchanging goods over time

C

Which of the following is a true statement? A) The conversion of a barter economy to one that uses money increases efficiency by increasing the cost to those who wish to specialize. B) The conversion of a barter economy to one that uses money increases efficiency by increasing the cost of exchange. C) The conversion of a barter economy to one that uses money increases efficiency by reducing transactions costs. D) The conversion of a barter economy to one that uses money does not increases efficiency

C

Compared to cheques, paper currency and coins have the major drawbacks that they ________. A) are hard to counterfeit B) must be backed by gold C) are not the most liquid assets D) are easily stolen

D

________ are the time and resources spent trying to exchange goods and services. A) Contracting costs B) Barter costs C) Bargaining costs D) Transaction costs

D

________ is the narrowest monetary aggregate that the Bank of Canada reports. A) M2 B) M0 C) M3 D) M1+

D

The difference between money and income is that ________. A) money is a stock and income is a flow B) money is a flow and income is a stock C) there is no difference—money and income are both stocks D) there is no difference—money and income are both flows

A

There is no single precise measure of money or the money supply for economists because ________. A) deciding what is generally accepted in payment for goods and services or in the repayment of debt is difficult to determine B) definitions change all the time C) economists cannot agree if currency should be considered money D) the government considers money supply statistics to be confidential and refuses to publish them

A

In the country of Moneyland the law allows you to repay mortgage in rocks. Thus, ________. A) money is scarce B) Moneyland is a developing country C) rocks in this country are considered as money D) Moneyland is a poor country

C

Patrick places his pocket change into his savings bank on his desk each evening. By his actions, Patrick indicates that he believes that money is a ________. A) unit of specialization B) medium of exchange C) store of value D) unit of account

C